Trying to create a material for to apply a texture on a game model
Okay, the thing is that you're using cycles but are not using the nodes to actually apply the image texture, you can do it like this:

Select the model in object mode -> go to materials -> select the material->go to node editor


After that, check the box use nodes



It'll look like this, then you have to create an image texture node by pressing SHIFT + A and click search, search for image texture, after that you only have to select the image you already have in the .blend file:



Hope this helps!